Regional report: North Africa
12 December 2013
There are some countries in North Africa that represent good opportunities for the construction industry, with international manufacturers and contractors alike targeting expansion in countries such as Algeria, Morocco and Tunisia.
But the picture is far from perfect in the region, with power vacuums and conflicts disrupting markets in Libya and Egypt. However, that is not to say that the entire construction sectors in these countries have ground to a halt – in fact there are clear signs of activity and investment despite the instability.
In Libya, for instance, a € 963 million (US$ 1.3 billion) contract to construct the first 400 km section of a 1,700 km coastal motorway was this year awarded to a consortium led by Italian contractor Salini Impregilo. The new motorway will run across Libya from the Tunisian border to the Egyptian border.
Development bank loans are also bolstering infrastructure investment in the region. The Islamic Development Bank (IDB), for example, has committed to a string of loans in the past 12 months, including US$ 200 million in support of Tunisia’s Rades-C combined cycle power project, and US$ 109 million for irrigation and drainage pumping stations in Egypt.
In Mali, the IDB has also pledged US$ 250 million to support reconstruction in the wake of conflict across the country. This came on top of funding of over € 240 million (US$ 308 million) from the African Development Bank (AfDB), plus a € 56 million (US$ 72 million) AfDB loan for a drinking water supply project.
In fact, the AfDB and Made in Africa Foundation have launched an infrastructure fund for the continent as a whole that aims to raise up to US$ 500 million by the first half of 2014. The target is to plug some of the US$ 93 billion of investment a year that the AfDB estimates is needed to 2020 to close Africa’s infrastructure deficit.
Meanwhile, construction equipment manufacturers are eyeing the region’s prospects closely. SMT Nigeria, the national dealer for Volvo Construction Equipment, Volvo Trucks and Volvo Penta, opened its new Volvo Service Centre in the capital Abuja in October, for example – the dealer’s fourth branch in the country.
Part of SMT Nigeria’s efforts to improve its sales and aftersales service in the country, the 20,000 m2 facility features a 10 bay workshop, inspection pit and parts store.
CEO of SMT Group Jérôme Barioz said, “Nigeria is a very important market for the group. Abuja is one of the continent’s fastest growing cities and Nigeria as a whole has huge potential.”
Meanwhile in Morocco, machines supplied by Volvo CE’s Chinese joint venture SDLG are helping on the construction of the country’s first high-speed rail line.
Expected to carry up to 10 million passengers a year, the 350 km rail line will link the country’s economic center, Casablanca, with one of the major cities in the north, Tangier. The project is estimated to cost US$ 4 billion and is scheduled to start running in 2015.
Two, 29 tonne class SDLG LG6300 excavators – the first two excavators from the manufacturer to arrive in Morocco – are being used by Chinese contractor COVEQ on the project.
The LG6300 ihas a wide chassis for increased stability and reinforced X-shaped lower brackets on the extended crawler. SDLG said this configuration allows the unit to adapt well to different working conditions while offering lower fuel consumption and higher performance.
Liebherr also produces especially robust machines targeted at this region, including the new 50 tonne class R 956 and 60 tonne class R 960 excavators – both sporting EU Stage IIIA / US Tier 3-compliant diesel engines.
The R 960, for example, is equipped with a reinforced undercarriage featuring crawler-track components from the next size larger excavator. In conjunction with a heavier counterweight, this is improves stability, allowing the use of a larger bucket.
Meanwhile, the steelwork on the R 956’s upper carriage has also been improved for extended service life.
Simplified maintenance and high productivity are also key to the design of Caterpillar’s new 320D Series 2 Excavator for the African, Middle East and CIS markets.
The main features of this 22 tonne class machine include a powerful hydraulic system, durable main structures and a refined operator station.
In addition, its 104 kW Tier 2 emissions-compliant engine has been designed to be a reliable performer in areas where fuel quality can be poor. A new filtration system uses a primary fuel filter / water separator and a secondary fuel filter to ensure clean fuel throughout the system.
Looking at the region as a whole, Gaby Rhayem, regional director for Doosan Construction Equipment in Middle East and Africa, said the North African market was still very active.
“The biggest opportunities are in Algeria, while the Moroccan market has been strong. Tunisia is recovering slowly from political instability, and we are seeing more opportunities in Libya,” he said.
However, Mr Rhayem also highlighted customs rules as one of the challenges of doing business in the region. “In North Africa the customs rules are very difficult and vary greatly,” he said. “They can change at any time making business difficult as is the case at the moment.”
But other, arguably more detrimental challenges also exist. For instance, North African countries did not rank too favourably in Transparency International’s 2013 Global Corruption Barometer, where a score of one means not at all corrupt and five means extremely corrupt.
Egypt scored an average of 3.6, Libya 3.25, Algeria 3.51, Morocco 3.54, Tunisia 3.08, Sudan 3.84 and Nigeria 3.25.
Allegations and proven instances of corruption can be very damaging to international companies. Take contractor Saipem for example – it is still being hit by the financial repercussions of a historic corruption case in Nigeria involving its Snamprogetti Netherlands business that stem from 1994, despite having already paid hundreds of millions of dollars in penalties to the US Securities and Exchange Commission.
Authorities in Italy are now pursuing this case, while at the same time Saipem is also entangled in a separate on-going investigation concerning alleged bribery connected with multi-million Dollar gas contracts in Algeria.
Even more serious risks also pose a threat in the region. In October, three employees of French contractor Vinci’s Sogea Satom subsidiary and another Areva employee were freed from captivity in Niger after three years being held hostage.
The workers were kidnapped along with three others during the night of 15 to 16 September, 2010 while working for French nuclear group Areva and Sogea Satom in Arlit, Niger.
While these were undoubtedly extreme circumstances, they serve to highlight the heightened risks that can be faced by contractors and manufacturers when doing business in some countries in North Africa in the current climate.